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Entry and exit event analysis probative of competitive effects in mergers, according to Paul
Johnson, Bates White economist.
WASHINGTON DC, April 14, 2008— Paul Johnson, Ph.D., Principal at Bates White LLC, presents a new approach to competitive effects analysis in
connection with mergers in “Entry and Exit Event Analysis.” This paper will be
published as a chapter in Issues in Competition Law and Policy, a three-volume collection written by prominent antitrust attorneys and economists.
Entry and exit event analysis involves estimating and interpreting how incumbents respond to the nearby entry and exit of competitors. This type of
analysis figured prominently in several high-profile mergers including Staples and Whole Foods. Dr. Johnson argues that this approach can be probative
of a merger’s competitive effects because it reveals whether premerger pricing is competitive and whether the elimination of one competitive
constraint through merger is likely to change competitive outcomes. This interpretation contrasts with others that use entry and exit event analysis
to simulate postmerger prices by equating the effects of exit with merger. Dr. Johnson argues that such simulation generally leads to biased predictions
about postmerger prices.
Dr. Johnson’s paper grew out of Bates White’s use of entry and exit event analysis in its examination of the competitive effects of
The Great Atlantic & Pacific Tea Company’s recent $1.4 billion acquisition of Pathmark Stores. The parties entered into a consent order with the
FTC that called for the divestiture of six of Pathmark’s 141 stores. Industry analysts had anticipated a much larger divestiture package of up to 30
stores. For more information, see Bates White’s press release and case study on this acquisition.
Issues in Competition Law and Policy, edited by Dale Collins of the law firm Shearman & Sterling, will be published by the ABA Section of Antitrust Law in
2008. It will also include a chapter by Bates White academic affiliate, Marius Schwartz.
Paul Johnson, Ph.D., specializes in microeconomic theory, merger analysis, and applied econometrics. He has provided economic analyses for antitrust matters
involving civil litigation and consulted on several high-profile mergers before the FTC and the Department of Justice. Dr. Johnson has published in
peer-reviewed journals on topics such as merger analysis, demand estimation, and applied econometrics. He leads cases in Bates White’s
Antitrust Practice, where he focuses on class certification issues, estimation of damages, and merger analysis. His expertise has been applied to a wide variety
of industries.
About Bates White
Bates White is a consulting firm offering services in economics, finance, and business strategy to leading law firms,
Fortune 500 companies, and government agencies. We provide our clients with a unique combination of quantitative and
analytical expertise, and an understanding of business issues across a range of industries. Bates White has offices
in Washington, D.C., and San Diego, Calif.
www.bateswhite.com
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